In private notes, we established that rsshanmugam wants to copy up to but not including the first record with an 'e' in position 1. Here's a DFSORT job that will do that. It generates an OPTION STOPAFT=n statement with n equal to the relative record number of the target record minus 1. In the above example, n=7-1=6. Note that it will actually generate an OPTION STOPAFT=n statement for each record with an 'e' in position 1, but DFSORT will only use the first one and ignore the others as duplicate control statements.
1. why overlay is not working. we r using DFSORT version 14 (not sure)?
You need z/OS DFSORT V1R5 PTF UQ95213 or DFSORT R14 PTF UQ95213 (Dec, 2004) to use DFSORT's new OVERLAY feature. The syntax error indicates you don't have this PTF installed. Ask your System Programmer to install it (it's free).
2. what should i do if the file is varying length type?
You can use this variation of the DFSORT job for VB records: